Rule change could cost Juneau $68 million

The city weighed in Wednesday on a proposed change in the interpretation of a maritime law that could cost the Juneau economy an estimated $68 million and drop sales tax revenues by $3.4 million annually.

• Photos

Sound off on the important issues at

Mayor Bruce Botelho said virtually every business would be affected by the proposal if approved without changes by the Department of Homeland Security Customs and Border Protection.

Botelho sent a letter to Customs in response to a Federal Registry posting in November announcing a proposed change to the interpretation of the Passenger Vessel Services Act of 1898.

The deadline for comment is Friday.

In essence the new interpretation of the maritime act would require all foreign flag ships leaving Seattle for Southeast Alaska to spend 48 hours, or 50 percent of the time scheduled at all Alaska ports, in a Canadian port.

No ship carrying more than 250 passengers through local waters travels under the U.S. flag.

At the moment, only ships from the East Coast to Bermuda have a 48-hour port call, said Michael Crye, executive vice president of Cruise Lines International. He said the new interpretation was adopted "without sufficient due process" and was done without a "reasonable economic impact analysis."

A seven-day Alaska cruise from Seattle, obeying the new requirements, would have only one chance to make a port call in Southeast Alaska, according to Drew Green, Juneau port manager for Cruise Line Agency of America.

"Two if they were really short," he said.

If adopted, the new rules would begin for next spring's cruise season. The Juneau Chamber of Commerce estimated a loss of 368,370 passenger visits in 2008 as a result.

Green said the net impact to Southeast Alaska would be 1 million fewer passengers and could cost the region $160 million in direct spending. That's not including payroll, port fees, crew spending, tour operator spending and taxes, he said.

As written, the new ruling would affect every cruise itinerary at every port in the U.S. The change comes at the request of U.S. Department of Transportation Maritime Administration. A cruise industry scuffle between U.S. and foreign ships in the Hawaiian Islands is at the heart of the request. Stiff competition drove cruises sailing under the U.S. flag to re-register under foreign flags and leave the market and resulted in the loss of thousands of U.S. merchant marine jobs.

Botelho said the proposed change was obviously intended to address an issue with the Hawaiian cruise industry, but that the draft interpretation was not limited to Hawaiian cruise itineraries. Botelho urged Customs to modify the language to specifically address ships operating in the lucrative 15-day Southern California to Hawaii market.

The 121-year-old act was originally created to foster a U.S. monopoly on passenger service between American ports and to build up the American merchant marine.

"It's an issue with history," said Sen. Kim Elton, D-Juneau.

The language in the document is too ambiguous for comfort, Elton said. He is drafting a letter asking that the ruling be applied only to Hawaii. But, the real power of persuasion rests with Alaska's congressional delegation, he said.

U.S. Sen. Ted Stevens is vice-chairman of the Commerce Science and Transportation Committee, which Customs falls under. A senior staff member in Stevens' Washington, D.C., office said Stevens intends to ask for the interpretation to apply only to Hawaii.

U.S. Sen. Daniel K. Inouye, D-Hawaii, is chairman of the committee.

All in the Alaska cruise industry are hoping for the interpretation to include the "Hawaiian provision," Green said.

"Without a change, it's potentially brutal for Alaskan cruise industry," he said.

• Contact Greg Skinner at 523-2258 or greg.skinner@juneauempire.com.